Wage Pressures Push Home Care Provider Into Senior Living

Wage pressures have home care companies pinching pennies to get by with razor-thin profit margins, but one provider has opened a new business line to replace and recapture the business that was lost after raising prices.

Select Home Care, a non-medical private duty home care provider based in California, has branched outside of taking care of seniors in their homes. The company’s founder and owner, Dylan Hull, has created a separate, ancillary service line called Select Senior Living, a small assisted living business, also based in the Golden State.

With its doors opening July 1, Select Senior Living’s 18 beds across three properties are already 100% occupied with a waiting list to boot. Hull opened the business line in response to losing an estimated 30% to 40% of his business in the last few years, largely due to wage pressures. Higher minimum wage rates and new overtime regulations forced the home care business to raise its prices substantially. In California, minimum wage is slated to rise to $15 per hour by 2018.

“We’re getting pinched hard with the business environment, legislation, the litigious world we live in,” Dylan Hull told Home Health Care News. “The big thing is the cost of doing business and this work has really just increased dramatically. Over the last couple of years we’ve seen a decline in the amount of new business and length of stay with our home care clients. When we looked closer, we realized [our clients] just couldn’t afford it.”

Hhiring a full-time home caregiver used to cost around $6,000 per month, Hull recently told Forbes.

Due to new wage-related regulations, the price has skyrocketed, and could be as much as $20,000 per month for the same care, Hull elaborated to HHCN. With this higher cost, Hull noticed that the company was losing clients to assisted living facilities, which could offer seniors round-the-clock care for less.

Not wanting to shut his doors, Hull considered adding a few ancillary service lines to his business before deciding to open up his own assisted living centers in Thousand Oaks, California. The facilities were purchased from a California operator, and each room rents for roughly $5,000 per month. Most of the staff from the previous operator was maintained in the transaction, according to Hull, who hopes to continue expanding the senior living business within California in the coming years.

“Here in California, the real estate business is really strong,” Hull said. “So, I thought, why not get into the real estate business doing what I know—senior care. I purchased three small assisted living communities in the hopes of recapturing the business we were losing, but also to get families, seniors and and clients who can’t afford home care and need a place to live with care.”

Eyeing reimbursement cuts and other issues related to Medicare and Medical—California’s Medicaid program—Hull decided against opening up a home health or hospice line of business. However, rising wage expenses means Hull is feeling the squeeze on both sides of the business.

The overlying issue, he says, is that higher wages are impacting seniors and potentially forcing small businesses to shut their doors.

“Our lawmakers think that they are giving this great boost to our economy.” Hull said. “But what they are failing to realize is the impact that is has toward our seniors. I would love to pay all of my staff double what I pay them now, but we wouldn’t be able to care for people because they couldn’t afford home care or senior living.”

Despite operating a new, separate company, home care is still the “bread and butter” of what Select does.

As for how the new senior living business is going, Hull says, “So far, so good.”

Written by Amy Baxter